Updated October 16, 2026. Quick answer: California’s Franchise Tax Board publications read describe no resident exclusion for 403(b) or 457(b) withdrawals: “you are taxed on all income, regardless of its source”.
More state retirement-income schedules, line by line: California Schedule CA (540) pension lines.
California at a glance
| Item | What the documents say |
|---|---|
| How the state treats 403(b) and 457(b) withdrawals | The documents read describe no resident exclusion |
| Do the state’s documents name these plans? | The documents read name both 403(b) and 457 plans |
| Retirement exclusion or credit | None for 403(b) or 457(b) withdrawals; the Board lists a federal uniformed-services retirement pay exclusion only |
| Public-employee pension rule | No |
| Rate in the documents read | Progressive; the top bracket in the 2025 Form 540 schedules is 12.30% |
| Changed for 2026? | The 2025 documents read describe no 2026 change |
What the California documents say
The Franchise Tax Board’s Publication 1005 treats a California resident as taxed on all income wherever it comes from. The pension lines of the Schedule CA (540) instructions say “Generally, no adjustments are made on this line” for the line that carries pensions and annuities, with narrow exceptions for railroad retirement and partially taxable pension distributions.
Publication 1005 does name the plans: a tax-sheltered annuity described in IRC Section 403(b) and a deferred compensation plan described in IRC Section 457. They appear in its list of retirement income for nonresidents, where the Board says “California does not impose tax on retirement income received by a nonresident”. That is a nonresident rule and not an exclusion for a California resident.
Withholding and federal tax
Whether a state withholds is a separate rule: see state withholding on retirement withdrawals. Federal rules: 403(b) withdrawal rules and 457(b) withdrawal rules. The IRS says pension and annuity payments from a qualified employer plan have “all or some portion of the amounts you receive may be taxable”.
What the documents do not say
- The documents read give a resident no exclusion for these plans; the one retirement-pay exclusion the Board lists is for federal uniformed-services retirement pay, which is not a 403(b) or 457(b) distribution.
Common mistakes
- Assuming California’s rule for a 401(k) or IRA also covers a 403(b) or 457(b): read whether its documents name the plan.
Related: whether California taxes 401(k) and IRA withdrawals, California retirement taxes, whether California taxes pensions, 403(b) withdrawal rules, 457(b) withdrawal rules, and state withholding on retirement withdrawals.
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Answer againSources
- 2025 FTB Publication 1005 Pension and Annuity Guidelines: https://www.ftb.ca.gov/forms/2025/2025-1005-publication.pdf
- 2025 California Form 540, Forms & Instructions, Personal Income Tax Booklet: https://www.ftb.ca.gov/forms/2025/2025-540-booklet.pdf
- IRS Tax Topic 410, Pensions and annuities: https://www.irs.gov/taxtopics/tc410
Sources: the primary documents linked above, read on October 16, 2026. General information, not tax advice. Your own facts decide the outcome, and a tax professional or the state agency itself is the right place to confirm anything consequential.